OTAQ PLC - Final Results
RNS Number : 8378T
OTAQ PLC
27 July 2022
 

 

 

 

OTAQ plc

("OTAQ", or the "Company")

 

Final Results for 12 months to 31 March 2022

 

OTAQ (LSE: OTAQ), the marine technology products and solutions group for the global aquaculture and offshore energy industries, announces results for the 12 months to 31 March 2022.

 

Financial Highlights

 

Group

2021/22

£'000

2020/21

£'000

Change

%

Revenue

4,292

4,053

5.9

Gross profit

2,027

2,303

(12.0)

Adjusted EBITDA*

(49)

524

(109.4)

Net (debt) / cash**

(1,268)

670

(289.3)

 

*Adjusted EBITDA (earnings before income, tax, depreciation, exceptional costs, impairment, share option charges and amortisation)

 

Strategic and Operational Highlights

·      Strong revenue and gross profit growth Offshore, Connectors and Technology Divisions

·      Aquaculture Division impacted by ongoing regulatory reviews of acoustic deterrent device usage, specifically in Chile and Scotland

·      Encouraging entry into the shrimp biomass measurement market with Minnowtech LLC

·      Strategic investment of 10% in Blue Lion Labs Ltd and completion of licensing and cooperation agreements

·      Continued focus on broadening reach through new product development including the live plankton analysis system for detecting harmful algal blooms

 

Commenting, Phil Newby, Chief Executive at OTAQ, said:

 

"Product innovation is at the core of OTAQ's ability to partner with clients to maximise welfare and production yields, continually broadening our portfolio of complementary products.  The addition of technologies in shrimp sonar, live plankton analysis systems and water quality monitoring now give OTAQ and its customers a new level of analysis and responsiveness in managing stocks and improving performance.

 

"Many of these products have been well received in the Chilean and Scottish markets, with early indications of commercial success, which is central to the Group's growth strategy

 

"Development of new products and the flourishing performance from the Offshore and Connectors divisions gives the directors confidence that the Group can return to profitable growth."

 

Contacts:

 

OTAQ PLC

Via Walbrook

Alex Hambro, Non-Executive Chairman


Phil Newby, Chief Executive Officer

Matt Enright, Chief Financial Officer




Dowgate Capital Ltd (Broker & Adviser)

020 3903 7715

David Poutney/James Serjeant

Nicholas Chambers/Russell Cook




Walbrook PR Ltd

020 7933 8780 or Otaq@walbrookpr.com

Tom Cooper/Nick Rome

 0797 122 1972 or 07748 325 236

 

About OTAQ:

 

OTAQ is a highly innovative marine technology company focused on the marine aquaculture, offshore energy, renewables, and oceanographic research sectors. It operates in four worldwide locations: Lancaster, Aberdeen and Ulverston in the UK and Puerto Montt in Chile.

OTAQ's marine technology portfolio includes a market-leading intelligent acoustic deterrent system, Sealfence, designed to protect marine-based aquaculture sites from predation, with multiple systems deployed in Scotland, Chile and Finland.

The Company's Oceansense leak detection systems have a global reputation as the industry standard solution and have been deployed successfully on hundreds of jobs. OTAQ's Dragonfish laser measurement system is fast becoming recognised as one of the most accurate underwater precision laser measurement systems available. OTAQ also has significant experience in the design and manufacture of underwater connectors, penetrators and communication systems.

It seeks to develop and continuously improve its products using its specialist mechanical, electronic and software engineers with decades of experience in bringing underwater technology products to market. Concurrently, OTAQ seeks to expand its technology portfolio through acquisitive growth, with the aim of further expanding its aquaculture and offshore product offering.

OTAQ is proud to be fully ISO 9001:2015 accredited through DNV-GL. ISO 9001 is an internationally recognised quality management system and demonstrates OTAQ's commitment to consistency, continual improvement and customer satisfaction. The certification also demonstrates its ability to consistently deliver products and services to market whilst meeting statutory and regulatory requirements by applying an effective quality management system.

 

 

 

CHAIRMAN'S STATEMENT FOR THE YEAR ENDED 31 MARCH 2022

 

I'm pleased to present my Chairman's Statement for the year ending 31 March 2022.

 

Synopsis

The results for the last financial year reflect a mixed outcome for the Group, characterised by continued disruption to our core acoustic deterrent device (ADD) business, partially offset by a significant upswing in activity for our Offshore and Connectors business and an encouraging growth in activity and commercial gains within our Technology and R&D division.  The continued delays from Marine Scotland on legitimising the use of ADDs in Scottish waters have severely impacted our revenues from this core division, but the growth in the price of oil during the year, exacerbated by the recent drive to secure oil and gas supplies away from Russian influence, has meant that the marine exploration industry has staged a significant recovery in activity and sales which we feel may be sustained into 2023.  Accordingly, we ended this year with revenues slightly ahead of 2021 but yielding a small EBITDA loss as our high margin ADD rentals business was severely impacted by the continuing lack of clarity in the regulation of the marine environment.

 

The Group enters the new financial year with a degree of uncertainty around its revenue forecasts. The Group is working hard to commercialise its strong pipeline of new products but the timing of new revenues is inherently difficult to forecast. For this reason, there remains material uncertainty around the cash position of the Group and whether there will be sufficient resources to trade and meet all obligations for the next twelve months. However, the Group is committed to and confident that it will be successful in raising additional funding which will mitigate uncertainties in respect of the forecasts and secure the Group's funding needs beyond the forecast period. The Group is also expectant that the revenue forecasts will be surpassed to alleviate the uncertainty around cash resources. Indeed, following the completion of the Group's first quarter, the Group is ahead of these forecasts. For this reason, the financial statements have been prepared on the going concern basis and I am confident the Group will complete the new financial year with improved revenue and a more robust balance sheet.

 

Strategy

The primary strategy of the Group is intended to create long-term shareholder value and remains the creation of a business of significance within the global aquaculture industry with a particular focus on reducing production risks for salmon farmers and more recently with shrimp farmers through our investment in Minnowtech LLC. Over time, the Group intends to deploy a range of sophisticated products designed to overcome many production and environmental challenges. These solutions will be based on a common data and communications infrastructure aiming to provide high quality real-time information to better manage production and welfare at aquaculture sites.

 

The Group strategy also embraces the development of new products for deployment in the oil, gas and renewables sectors through its Offshore, Connectors and Technology divisions. The development of new technologies in these divisions permits cross-deployment into the aquaculture arena which the Group is now beginning to exploit through cross-deployment of our camera systems and laser measurement devices.

 

Aquaculture

The Group's historic core aquaculture product, Sealfence, significantly improves yields for the marine salmon farming industry by reducing the frequency of predator attacks using acoustic technology. Following ongoing regulatory challenges in the year, Sealfence rentals and sales now account for around a third of Group revenues with almost all long-term rental contracts now ended. During the last 12 months the number of Sealfence units deployed has declined to minimal numbers in Scotland and two-year historic lows in Chile. The primary reason for the Scottish decline is Marine Scotland's instigation of an overarching environmental review during 2020 into the use of ADDs in the marine environment which has created uncertainty around the necessity of a licensing system for ADD use. Marine Scotland is expected to publish revised guidance governing the use of ADDs in Scottish waters during 2022 although its lack of urgency in resolving this issue during 2021 has been a frustration.  We have fully cooperated with Marine Scotland in helping to produce and analyse objective scientific data to deliver what we anticipate will be a sensible, evidence-based policy in this area.

 

Environmental studies are at a more advanced stage in Chile with the licensing body in that country, Subpesca, recently adopting a less intrusive view regarding ADD usage until local environmental impact trials are fully concluded.  We fully expect local environmental impact studies in Chilean waters to support the view that ADDs can be safely used there. However, consumer demand for Aquaculture Stewardship Council certification in Chile (and to a lesser extent in Scotland) has also resulted in lower demand for ADD use whilst that certification is obtained.

 

Nonetheless, the Group has enjoyed new Sealfence wins in Ireland and Alaska over the past year to demonstrate the potential in new non-core territories and these remain active markets with potential for further growth.

 

In addition to our acoustic deterrence technology, the Group has again been busy over the past 12 months developing adjacent technologies that will broaden our reach into the global aquaculture sector.  Specifically, we have now achieved our first commercial sales of shrimp biomass measurement technology through our strategic partnership with Minnowtech and fully expect these revenues to develop further in 2022. Likewise, through a collaboration with Blue Lion Labs Ltd in Canada, we have accelerated the development of our phytoplankton detection technology and have now commenced field trials with salmon farmers in both the Northern and Southern hemispheres with the expectation of commercialisation in late 2022.  Phytoplankton, or "harmful algal bloom", is a major disease challenge for finfish farmers generally and it is estimated the global aquaculture industry suffers $3.4 billion in damage and losses annually due to events such as harmful algal blooms.  Early detection of this problem should allow farmers to deploy their defence systems early enough to markedly reduce the losses and improve overall fish welfare.

 

Offshore, Connectors & Technology

Other products in the Group's portfolio include a range of sub-sea cameras, laser measuring devices, leak detection systems and high integrity electrical connectors for use in the offshore renewables and oil and gas markets, which form the Group's Offshore and Connectors divisions. The upturn in the oil and gas sector has helped these divisions deliver significantly improved results and we are hopeful that this upsurge in business will continue and bring benefits during the new financial year.

 

The Group will continue to consider the acquisition of small and medium-sized marine technologies. We are highly selective in acquiring businesses that either demonstrate sustainable profits or own a nascent technology that can be applied to our marine-based systems to create a profitable future revenue stream. It is with this approach in mind that we were able to acquire the trade and assets of ROS Technology in November 2020 for £0.3m which is a small electronics and design business focussed on tracking technology that has helped commercialise the Minnowtech shrimp biomass measurement technology and now forms the basis of the Technology division.

 

Our team

The year has again been challenging for the team both in the UK and in Chile with some continuing Covid-19 pandemic restrictions impacting, especially regarding staff availability, although these have begun to abate in the latter half of the year. However, the team have faced the challenge robustly and have continued to ensure our customers' requirements are met whilst driving forward the Group's strategies.

 

The executive team and all employees within the Group worked especially hard against the strictures imposed by the Covid-19 pandemic in 2021 and 2022 to produce these results. The Board and, I am sure, our shareholders remain grateful to all our colleagues for their efforts that have delivered this performance despite the difficulties that have been imposed on us in the aquaculture sector.  We now look forward to continuing to develop and launch our new technologies in our varied and dispersed geographical markets

 

 

Alex Hambro

Chairman

 

 

 


 

CHIEF EXECUTIVE'S REPORT FOR THE YEAR ENDED 31 MARCH 2022

 

Review of the period

The Group has suffered in the year from the challenges encountered in the Aquaculture sectors of the business with regulatory challenges in both Scotland and Chile impacting the Group's performance in both those territories.  However, the Offshore, Connectors and Technology divisions have all performed well to help offset some of the Aquaculture downturns. New product launches, realising the benefit of the ROS Technology transaction from November 2020 and an improvement in the oil and gas sector have helped deliver the performance in these divisions.  

 

On 10th May 2021, the Group completed the 10% investment in Blue Lion Labs Ltd, a company registered in Canada that specialises in plankton detection and identification. As part of this investment the Group signed cooperation agreements and licensing agreements with Blue Lion Labs Ltd to develop their technology for use in our planned harmful algal bloom detection technology, which the Group now aims to launch in the later stages of 2022.

 

Despite the challenges encountered in the year, the Group achieved 5.9% organic growth with this delivered through £1.17m in the Connectors division (2021: £0.86m), £0.92m in the Offshore division (2021: £0.51m) and £0.76m (2021: £0.13m) in the Technology division.  This helped overcome the decline in Aquaculture which achieved revenues of £1.45m (2021: £2.55m) in the year. 

 

Sales to non-UK territories have increased from 30% of total revenue in 2021 to 46% in 2022 and this diversification into new territories has helped to start to reduce the Group's reliance on the Scottish aquaculture market in particular. The December 2020 introduction by Marine Scotland of reviewed guidance concerning the licensing process for fish farms in Scotland wishing to use Acoustic Deterrent Devices (ADDs) has led to the poor performance in the Scottish aquaculture market. The Group continues to work with relevant authorities to overcome the reluctance for applications to be made but it is not possible to forecast an improvement in this market until salmon farmers are willing to make licensing applications. The Chilean market for ADDs is also experiencing some challenges with Chilean farmers in particular keen to adopt Aquaculture Stewardship Council certification and this has led to a reduction in Sealfence numbers whilst this certification is obtained. However, progress has been made with Subpesca, the Chilean authority regulating ADD use, during the year with the Group increasingly confident that no restrictive regulations or guidance will be put in place, as has largely been the case to date in Chile.   

 

Revenue

Group revenue for the year ended 31 March 2022 increased from £4.05 million to £4.29 million, an increase of 5.9%. This revenue growth is all organic. The investment in Minnowtech LLC has contributed to this growth with significant quantities of the Minnowtech shrimp measurement device, BRS-1, supplied to Minnowtech in the year. The investment in research and development has also contributed with new products such as tracking devices, the next iteration of the OceanSense device and Lander survey vessel all launched in the year.

 

The Group continues to grow globally with UK revenue now representing only 54% of total revenue (2021: 70%). Chile represents 8% (2021: 7%) of total revenue with other European countries accounting for 13% (2021: 11%) of total revenue and the rest of the world for 25% (2021: 12%) of total revenue.

 

Profit

The statutory loss for the year of £1.90m (2021: £0.53m) was impacted by the increase in administrative expenses to £4.14m (2021: £3.09m) as well as the reduced gross margin of 47.2% (2021: 56.8%) resulting from the change in the sales mix. The £4.14m of administrative expenses was impacted by certain one-offs including a £0.31m (2021: £nil) impairment charge for the write-down of Sealfence units returned from customers. There was a £0.57m (2021: £0.17m) intangibles amortisation charge which included additional one-off £0.30m impairment charges relating to development costs not commercially viable.      

 

The Group incurred a number of exceptional charges in the year totalling £0.26m (2021: £0.16m). These included costs that were principally associated with legal fees for the 6,272,729 new shares issued in January 2022, legal costs associated with investments and a charge for the additional amount required for the deferred acquisition costs relating to the 2018 MarineSense Limited acquisition. These costs are either one-off or relate to funding or investment activities.

 

Dividends

The Board is not recommending a final dividend (2021: £nil).

 

Trading environment

The North Sea and wider oil market in which the Offshore division operates, and which impacts on demand for the Connectors division, has experienced a period of renewed activity in line with the increase in oil prices. This is expected to continue to drive demand in these divisions for the next year. The market for ADDs in Scotland in particular is likely to remain subdued for the immediate future whilst the licensing situation is clarified. It is difficult to predict what the market size will be once this clarification has taken place. The Chilean market has been volatile in the year but progress is being made with the Chilean authorities around the formal approval to use ADDs and, in conjunction with ASC certification, it is hoped this will enable the Chilean market to resume growth.   

 

Despite 46% (FY21: 23%) of the Group's revenue now being generated overseas, exchange rates have only a minor influence on the Group's business: OTAQ's supply costs are largely denominated in Sterling and most of its revenue is invoiced in Sterling with less than 10% of revenue invoiced in different currencies. Currency movements in the year have not had a material impact.

 

Acquisitions

As a buy-and-build group, the acquisition of new businesses is a key feature of Group strategy. Executing this effectively is key to ensuring that long-term value is generated for shareholders; we are highly selective in relation to both the acquisition price paid and the long-term quality of any potential addition to our Group.

 

The industries in which we operate contain a multitude of start-ups and small niches that are potentially complementary to the strategy of the Group. The Group has demonstrated expertise at executing a number of acquisitions and integrating them into the Group successfully and this has continued with the investments in Minnowtech LLC and Blue Lion Labs Ltd.

 

In May 2021, the Group announced a 10% investment into Blue Lion Labs Ltd, a Canadian plankton technology company that will provide detection and analysis of plankton in water. As part of this investment, the Group has signed a cooperation agreement with the aim of commercialising Blue Lion's technology in combination with OTAQ's hardware for use in the salmon farming industry. This investment has helped accelerate the delivery of this long-term project with field trials now commenced with prospective customers and launch anticipated to be in the latter half of 2022.

 

Innovation

The Group has continued to invest in the development of new products and improvement to existing products. Investment in research and development, capitalised as development costs, amounted to £0.59 million in the year to 31 March 2022 (2021: £0.68 million), equivalent to 14% of Group revenue (2021: 17%). The aim of the Group's research and development team is to deliver key projects; this has been demonstrated in the year with the successful launch of the Minnowtech shrimp measurement sonar, tracking technology for use in sports racing, OceanSense IV and the Lander seabed survey device. These new products have contributed significant six-figure revenue in the year.

 

Current trading and prospects

Following relaxation of Covid-19 restrictions in the UK and the rest of the world during the year, the Group has operated with increasing normality with business development activities taking place including exhibiting at several trade shows.   

 

There remains uncertainty in the coming financial year due to the material uncertainties around working capital requirements and funding outcomes with more detail to be found in the going concern note 2 (c) below. The long-term Sealfence rental contract model no longer offers OTAQ the security of the past but the Group has worked hard to develop new product lines and territories. The strategic investments in Blue Lion Labs Ltd, Minnowtech LLC and the ROS Technology purchase are expected to continue to benefit the group in the coming year.

 

Despite the ongoing difficulties being encountered in the Group's historically core salmon farm ADD markets, the development of new products and flourishing performance from the Offshore and Connectors divisions gives the directors confidence that the Group can return to profitable growth.

 

 

Phil Newby

Chief Executive

 

CHIEF FINANCIAL OFFICER'S REPORT FOR THE YEAR ENDED 31 MARCH 2022

 

The strategy of the Group is to build a business of significance within the aquaculture and offshore industries with the key financing requirements being to ensure there is sufficient resource to fund new product development.

 

The Group's Key Performance Indicators are aligned to revenue, profits and ensuring sufficient cash flow to deliver future growth. These three measures were below targets in the year to 31 March 2022 due to the near complete withdrawal of Sealfence units from the Scottish market. However, cash flow has been supplemented by the issue of shares in January 2022 which aided cash balances by an amount net of all relevant costs of £1.23m. In addition, the Group carefully monitors loss time incidents and employee absenteeism and turnover. Loss time incidents were zero (2021: zero) for the year and employee absenteeism and employee turnover were in line with historic trends.  

 

Revenue

Group revenue increased by 5.9% to £4.29 million compared with £4.05 million in the prior year with organic growth accounting for all of the growth and despite the loss of the Group's two main Sealfence customers during 2020 and 2021. 

 

Across our four business units, Aquaculture revenues decreased by £1.10m to £1.45 million with OTAQ Offshore contributing £0.91m (2021: £0.51m) to revenue, OTAQ Connectors contributing £1.17m (2021: £0.86m) and the Group's technology division, including revenue from sales to Minnowtech LLC and contracts acquired as part of the ROS Technology acquisition in November 2020, contributing £0.76m (2021: £0.13m).

 

Profits

The preferred measure of assessing profits for the Group is explained below:

 

 

2021/22

£'000

2020/21

£'000

Operating loss

(2,114)

(791)

Share option charge

20

55

Government grant

-

123

Exceptional costs

257

161

Amortisation of intangible assets

572

165

Impairment of rental units

311

-

Right-of-use depreciation

164

118

Depreciation on property, plant and equipment

741

693

Adjusted EBITDA*

(49)

524

 

* Earnings before income, tax, depreciation, share option charges, impairment, exceptional costs and amortisation.

 

Adjusted EBITDA declined to a loss of £0.05 million from £0.52m profit in 2021 with the corresponding EBITDA operating margin declining from 13% in the prior year to a 1% EBITDA operating loss. This decline was driven by the increase in Administrative expenses to £4.14m (2021: £3.09m), with £0.75m of this increase illustrated in the above table. The remaining additional spend related to costs associated with acoustic deterrent device impact surveys as well as additional travel and marketing costs as relevant restrictions were lifted following the end of the Covid-19 restrictions in the UK and around the world.  The EBITDA decline also resulted from a decline in the gross profit percentage from 56.8% to 47.2% due to the changing revenue mix away from Sealfence rentals.

 

Operating losses increased to £2.11m from £0.73m with the total comprehensive expense for the year increasing to £1.90 million (2021: £0.53 million). The statutory loss before tax increased to £2.16 million compared to £0.73 million in 2021.

 

Adjusted EBITDA

Adjusting items relate to expenditure which does not relate directly to the core activities of the Group and is considered to be one-off in nature or in relation to investing, restructuring or financing activities. The total pre-tax adjusting items recorded in the year to 31 March 2022 were £0.26m. These relate to £0.08m being fees relating to the January 2022 issue of equity, £0.04m relating to legal fees in association with investments made, £0.04m relating to the revaluation of deferred acquisition costs and £0.10m of sundry costs considered to be one-off.

 

In addition to this were depreciation charges of £0.74 million (2021: £0.69m), intangible amortisation charges of £0.57m (2021: £0.17m) and right-of-use depreciation charges of £0.16m (2021: £0.12m). There was also an impairment charge of £0.31m relating to Sealfence units returned from customers following the end of rental agreements.

 

Other operating income

The grant income received of £0.13m (2021: £0.12m) related to the HMRC CBILs scheme. In 2020 the grant related to the HMRC furlough scheme in the UK of £0.02m and a £0.10m grant from the Scottish government relating to the reduced market activity impacting the Offshore division.

 

Finance costs

Net finance costs totalled £0.17m (2021: £0.06m) and related to the interest charge relating to deferred acquisition payments made in the year associated with the terms of the acquisition of Marine Sense Limited in 2018, right-of-use interest charges and predominantly interest costs relating to the CBILs loan.

 

Taxation

As the Group remains in a statutory loss-making position, there is no overall Group tax charge. The Group continues to benefit from research and development tax credits which, along with a reduction in deferred tax of £0.1m, accounts for the £0.25m (2021: £0.19m) tax credit in the year.

 

Earnings and losses per share

Statutory basic losses per share were 5.9p (2021: loss 1.7p) and statutory diluted losses per share totalled 5.9p (2021: loss 1.7p). These are calculated using the weighted average number of shares in existence during the year.

 

Return on Capital

The Group intends to report on capital returns once sustained profitability has been achieved. Whilst capital returns are monitored currently, it is not a key performance or key results measure given the Group's high revenue growth and current statutory loss-making position.

 

Dividends

No dividends have been paid in the year (2021: £nil) and no dividend is recommended. It is expected that all cash resources will be retained by the Group.

 

Headcount

The Group's number of employees for 2022 stood at 45 (2021: 42). The change in staff numbers during the year was due to the growth of the business.

 

Share capital and share options

The Group's issued share capital at 31 March totalled 37,716,250 Ordinary shares (2021: 30,763,251). During the year, share options for 584,416 were exercised with a further 95,854 (2021: 37,240) shares issued as part of the employee Share Incentive Plan which came into effect in October 2020. 6,272,729 new shares were issued at a price of 22p as part of a funding round held in January 2022.

 

Share options issued in the year totalled 800,000 (2021: 750,000) with 2,130,900 (2021: 2,144,908) share options in issue at 31 March 2022. 229,592 (2021: 229,592) share options lapsed in the year due to performance criteria not being met.  Warrants totalling 320,000, included in the above figures, were outstanding on 31 March 2022 (2021: 320,000)

 

Cashflow and net debt

This year's cash generated from operations totalled an outflow of £1.85 million (2021: inflow £0.17 million). Total capital expenditure amounted to £0.42 million (2021: £0.80 million).

 

Year-end cash balances totalled £1.01 million compared to £3.12 million in 2021. The Group finished 2022 with net debt of £1.27 million compared to £0.67 million of net cash at the end of 2021 as reconciled below:

 

 

2021/22

£'000

2020/21

£'000

Cash and cash equivalents

1,008

3,120

Non-current lease liabilities

(255)

(272)

Current lease liabilities

(161)

(249)

Non-current financial liabilities

(1,392)

(1,813)

Current financial liabilities

(421)

(187)

Current deferred payment for acquisition

(213)

(215)

Income tax asset

166

286

Net (debt) / cash

(1,268)

670

 

The directors consider the income tax credit to be part of net debt as the asset will be converted into cash.

 

As well as the £0.42m spend on fixed assets, with £0.37m being for systems for rental, mainly Sealfence units, £0.59m was spent on research and development activities and £0.21m was invested in Blue Lion Labs Ltd.

 

Following the completion of a £2.00m CBILs facility in February 2020, £0.19m was repaid during the year with a further £0.02m of interest paid not funded by the government grant.

 

Assets and liabilities

Total current assets at 31 March 2022 were £4.11m compared to total current assets of £5.17m at 31 March 2021. The key change during the year relates to the decrease in cash balances to £1.01m from £3.12m and the increase in trade and other receivables to £1.77m (2021: £0.86m) due to the timing of revenue for the year being weighted towards the last quarter. Inventories have increased to £1.18m from £0.90m with trade and other payables decreasing to £1.24m from £1.81m.

 

Total liabilities have decreased from £4.76m at 31 March 2021 to £3.77m at 31 March 2022 with this decrease driven by the repayments due under the £2m CBILs loan, reducing right-of-use liabilities and a reduction in deferred income and trade payables. Right-of-use lease liabilities recognised in the year amount to a total liability of £0.42m (2021: £0.52m).

 

With the difficulties of the year, the Group's financial position is weaker than in previous years and so tight cost control and cash management is being adhered to through tighter purchasing authority limits and greater focus on debtor collection and inventory management.  

 

Summary

The Group will begin the new financial year in a financial position requiring careful management. The Group's divisions, with the exception of Aquaculture, are trading better than in previous years and there is optimism that these divisions can return the Group to an EBITDA-positive position and improve the Group's cash performance.

 

 

Matt Enright

Chief Financial Officer

 


 

consolidated Statement of comprehensive income

 

 

Note

Year ended 31 March 2022

Year ended 31 March 2021

 


£'000

£'000

 




Revenue

4

4,292

4,053

Cost of sales


(2,265)

(1,750)



───────

───────

Gross profit


2,027

2,303

 


 

 

Administrative expenses


(4,141)

(3,094)

 


───────

───────

Operating loss

5

(2,114)

(791)

 


 

 

Other operating income

5

131

123

Finance income

7

-

-

Finance costs

7

(172)

(58)



───────

───────

Loss before taxation


(2,155)

(726)

 


 

 

Taxation

8

251

192



───────

───────

Loss for the year


(1,904)

(534)

 


═══════

═══════

 


 

 

Attributable to:




Equity shareholders of the Group


(1,904)

(534)



───────

───────



(1,904)

(534)



═══════

═══════

Other comprehensive income




 

Items that will be reclassified subsequently to profit and loss:




Exchange differences on translation of foreign operations


(7)

21



───────

───────

 




Total comprehensive expense for the year


(1,911)

(513)

 


═══════

═══════









Attributable to:




Equity shareholders of the Group


(1,911)

(513)



───────

───────



(1,911)

(513)



═══════

═══════


As per note 9, the loss for the year arises from the Group's continuing operations. Losses Per Share were 5.9p (2021: loss 1.7p) and Diluted Losses Per Share were 5.9p (2021: loss 1.7p).

The accompanying notes form an integral part of these consolidated financial statements.

 



 

CONSOLIDATED Statement of financial position

 

 

Note

31 March 2022

31 March 2021

 

 

£'000

£'000

ASSETS




Non-current assets




Property, plant and equipment

10

919

1,548

Right-of-use assets

11

434

526

Unlisted investments

13

511

297

Intangible assets

12

2,970

2,955



───────

───────

Total non-current assets


4,834

5,326

Current assets




Trade and other receivables

15

1,766

860

Income tax asset

16

155

286

Inventories

17

1,182

899

Cash and cash equivalents

18

1,008

3,120



───────

───────

Total current assets


4,111

5,165

 


───────

───────

Total assets


8,945

10,491

 


═══════

═══════

EQUITY AND LIABILITIES




Equity




Share capital

19

5,657

4,614

Share premium

19

3,280

2,897

Share option reserve

25

150

473

Merger relief reserve

20

9,154

9,154

Reverse acquisition reserve 

20

(6,777)

(6,777)

Other reserve

20

384

136

Revenue reserve

20

(6,668)

(4,764)



───────

───────

Total equity


5,180

5,733

 




Non-current liabilities




Other creditors

22

-

38

Deferred tax

23

80

176

Financial liabilities

24

1,392

1,813

Lease liabilities

11

255

272



───────

───────

Total non-current liabilities


1,727

2,299





Current liabilities




Trade and other payables

22

1,243

1,808

Financial liabilities

24

421

187

Deferred payment for acquisition 

21

213

215

Lease liabilities

11

161

249



───────

───────

Total current liabilities


2,038

2,459

 


───────

───────

Total liabilities


3,765

4,758

 


───────

───────

Total equity and liabilities


8,945

10,491

 


═══════

═══════

 

 

consolidated Statement of changes in equity

 

 

 

 

 

 

Note

Share capital

Share premium

Share option reserve

Merger relief reserve

Reverse acquisition reserve

Other reserve

Revenue reserve

Equity attributable to owners of the parent company

Total equity

 


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 











Balance at 1 April 2020


4,582

2,892

559

9,154

(6,777)

-

(4,230)

6,180

6,180

 


 

 

 

 

 

 

 

 

 

Loss for the year


-

-

-

-

-

-

(534)

(534)

(534)

Exchange differences on translating foreign operations


-

-

-

-

-

21

-

21

21

Total comprehensive expense for the year


-

-

-

-

-

21

(534)

(513)

(513)












Issues of shares


6

5

-

-

-

-

-

11

11

Transfer on exercised and cancelled options


26

-

(141)

-

-

115

-

-

-

Charge for share options

25

-

-

55

-

-

-

-

55

55



────

──────

──────

──────

──────

──────

──────

──────

──────

Balance at 31 March 2021

 

4,614

2,897

473

9,154

(6,777)

136

(4,764)

5,733

5,733

 

 

════

══════

══════

══════

══════

══════

══════

══════

══════

Balance at 1 April 2021


4,614

2,897

473

9,154

(6,777)

136

(4,764)

5,733

5,733

 


 

 

 

 

 

 

 

 

 

Loss for the year


-

-

-

-

-

-

(1,904)

(1,904)

(1,904)

Exchange differences on translating foreign operations


-

-

-

-

-

(7)

-

(7)

(7)

Total comprehensive expense for the year


-

-

-

-

-

(7)

(1,904)

(1,911)

(1,911)












Issues of shares


955

383

-

-

-

-

-

1,338

1,338

Transfer on exercised and cancelled options


88

-

(343)

-

-

255

-

-

-

Charge for share options

25

-

-

20

-

-

-

-

20

20



────

──────

──────

──────

──────

──────

──────

──────

──────

Balance at 31 March 2022

 

5,657

3,280

150

9,154

(6,777)

384

(6,668)

5,180

5,180

 

 

════

══════

══════

══════

══════

══════

══════

══════

══════

CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

Note

31 March

 2022

31 March

2021

 


£'000

£'000

Cash flows from operating activities




 

Loss before taxation


(2,155)

(726)

 

Adjustments for non-cash/non-operating items:




 

Depreciation of property, plant and equipment

10

741

693

 

Impairment of property, plant and equipment

10

311

-

 

Loss on disposal of property, plant and equipment

10

-

5

 

Depreciation of right-of-use assets

11

164

118

 

Gain on write-off of lease liability

11

-

(37)

 

Loss on disposal of right-of-use assets

11

-

25

 

Amortisation of intangible assets

12

277

165

 

Impairment of intangible assets

12

295

-

 

Gain on remeasurement of deferred consideration payable

21

40

(13)

 

Share option charge

25

20

55

 

Finance income


-

-

 

Grant income


131

-

 

Finance expense


(172)

58

 

 


───────

───────

 

 


(348)

364

 

Changes in working capital:




 

(Increase) / decrease in inventories


(283)

73

 

(Increase) / decrease in trade and other receivables


(906)

47

 

Decrease in trade and other payables


(603)

(360)

 



───────

───────

 

Cash from operations


(2,140)

124

 

Taxation


289

48

 



───────

───────

 

Net cash from operating activities


(1,851)

172

 



───────

───────

 

Cash flows from investing activities




 

Purchases of tangible fixed assets

10

(423)

(804)

 

Purchases of intangible assets

12

(587)

(966)

 

Acquisition of subsidiaries

21

-

(329)

 

Acquisition of unlisted equity securities

13

(214)

(297)

 

Interest received


-

-

 

Re-translation of foreign subsidiaries


(7)

21

 



───────

───────

 

Net cash used in investing activities


(1,231)

(2,396)

 



───────

───────

 

Cash flows from financing activities




 

Proceeds on issue of shares


1,408

11

 

Expenses of share issues


(70)

-

 

Proceeds from loans


-

2,000

 

Repayment of loans


(187)

-

 

Principal element of lease payments


(181)

(111)

 

EBT loan


-

(150)

 

Repayment of development loan


-

(487)

 

Interest paid


-

(6)

 



───────

───────

 

Net cash from financing activities

24

970

1,257

 



───────

───────

 

Net decrease in cash and cash equivalents


(2,112)

(967)

 

Cash and cash equivalents at beginning of year


3,120

4,087

 



───────

───────

 

Cash and cash equivalents at end of year


1,008

3,120

 



═══════

═══════

 

 

 

 



NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2022

 

1.       Reporting entity

 

OTAQ plc ("the Company'') and its subsidiaries (together, "the Group'') develop, provide and support the technology for use in the aquaculture industry and offshore oil & gas industries. The principal activity of the Company is that of a holding company for the Group as well as performing all administrative, corporate finance, strategic and governance functions of the Group.  The Company is a public limited company, which is listed on the London Stock Exchange and domiciled in England and incorporated and registered in England and Wales.  The address of its registered office is 8-3-4 Harpers Mill, South Road, White Cross, Lancaster, England, LA1 4XF. The registered number of the Company is 11429299. 

 

The principal accounting policies adopted by the Group and Company are set out in note 2.

 

2.       Accounting policies

 

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied unless otherwise stated.

 

(a)      Basis of preparation

 

The consolidated financial statements of OTAQ plc have been prepared in accordance with International Financial Reporting Standards in conformity with the requirements UK-adopted International Accounting Standards applicable to companies reporting under IFRS and the Companies Act 2006. The consolidated financial statements have been prepared under the historical cost convention, as modified for any financial assets which are stated at fair value through profit or loss. The consolidated financial statements of OTAQ plc are presented in pounds sterling, which is the presentation currency for the consolidated financial statements. The functional currency of each of the group entities is Sterling apart from OTAQ Chile SpA which is the Chilean Peso. Figures have been rounded to the nearest thousand.

 

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement and complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

 

The Group has taken advantage of the audit exemption for three of its subsidiaries, OTAQ Aquaculture Limited (company number SC498922), OTAQ Offshore Limited (company number SC314760) and OTAQ Connectors Limited (company number 03390514) by virtue of s479A of the Companies Act 2006. The Group has provided parent guarantees to these three subsidiaries which have taken advantage of the exemption from audit.

 

(b)      Basis of consolidation

The Group's financial statements consolidate the financial information of OTAQ plc and the entities it controls (its subsidiaries) drawn up to 31 March each year. All business combinations (except for the Hertsford Capital plc reverse takeover on 31 March 2020 which used the merger accounting method) are accounted for by applying the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group.

 

The Group measures goodwill at the acquisition date as:

-     the fair value of the consideration transferred; plus

-     the recognised amount of any non-controlling interests in the acquiree; plus

-     the fair value of the existing equity interest in the acquiree; less

-     the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

 

Transaction costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

 

 

All subsidiaries are entities over which the Group has the power to govern the financial and operating policies. The percentage holdings of the Company in its subsidiaries is set out in note 14. The subsidiaries have been fully consolidated from the date control passed. All intra-group transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation. The accounting policies of subsidiaries are amended where necessary to ensure consistency with the policies adopted by the Group.             

 

(c)      Going concern

 

Basis of preparation

 

These financial statements are prepared on the going concern basis. The directors have a reasonable expectation that the Group will continue in operational existence for the foreseeable future.

 

Background

 

The Group is focussed on delivering long-term shareholder value and this requires the Group to develop new products for its services, leading the Group to invest heavily in the development and procurement of these products. This has been possible to date through the use of its cash reserves as well as the drawdown of a £2.0m loan facility in February 2021 and the issue of new shares for £1.3m in January 2022. In addition, the Group has historically been able to utilise the significant cash generated from the rental of its Sealfence units in the Aquaculture division. The Aquaculture business unit has been impacted by regulatory reviews in the core markets in which it operates. The Scottish market Aquaculture rentals were historically under long-term rental contracts, contributing regular and guaranteed income from the time of the Company's floatation in March 2020 until the termination of one major contract in December 2020 and the termination of the second major contract in April 2022. The Group is hopeful that Sealfence rentals will return but under what terms and to what level is very difficult to forecast at present given the ongoing uncertainty in the Scottish market created by regulatory guidance being updated.

 

Results for the year

 

The performance in the year to 31 March 2022 has been sustained by the launch of new products but also the final revenue relating to the long-term rental contracts that have now ended. As a result of these contracts no longer being in place, the Group has entered a period of transition with greater reliance now being placed on future revenue generation based on developing the rental business in new markets with different regulatory environments, continuing growth in other areas of the Group's business and the commercialisation of new products developed internally.  Whilst the new financial year is entered into with no guarantees of future revenues, the Group has worked hard to commercialise new products, make strategic investments and develop customer relationships. As at 31 March 2022, the Group had cash and cash equivalents of £1.0m.

 

Forecasts

 

The directors have prepared forecasts which cover the period to July 2023. The forecasts include revenue from the Group's identified pipeline of sales opportunities as well as revenues where specific customer opportunities are yet to be identified. If new business and new sales orders are not delivered as expected, the Group can reduce costs accordingly and improve cash flow. However, the most impactful cost reductions would put at risk the completion of the development of new products, some of which are believed to be close to commercialisation and therefore revenue generating. For this reason, the directors are reluctant to reduce costs at this stage but are able to do so if new sales orders are not received as expected and additional funding is not available. The forecasts demonstrate a reasonable expectation that the Group is able to continue to meet its obligations as they fall due in the context of the material uncertainties detailed. Following the completion of quarter one of the new financial year, the Group is ahead of these forecasts in terms of both revenue and profit.

 

Sensitivities

 

The directors have modelled various downside scenarios and under each scenario the directors have reviewed the Group's funding requirements over the next year. Based on the scenarios and forecasts that have been reviewed by the directors, the directors have a reasonable expectation that the Group has sufficient financial resources to meet its financial commitments and strategic objectives if new sales orders are delivered reasonably in line with the forecasts. The directors have modelled various plausible scenarios and in the most pessimistic there is a shortfall in the financial resources required where new sales orders are not delivered.

 

New funding

 

The directors, in conjunction with its advisers, are progressing discussions with respect to funding options, including but not limited to debt and/or equity, from existing and other potential investors which would enable the Group to mitigate the risk of not achieving its forecast performance, accelerate the ongoing development of new products and provide funding for the period beyond that covered by the going concern assessment. Whilst the directors are confident that new funding will be available, should this not be concluded in a satisfactory manner, the Group may need to consider alternative funding options and the board cannot be certain that such funding would be secured.

 

Material uncertainty in respect of going concern

 

In preparing their forecasts the directors recognise the inherent difficulties in forecasting future performance. The Group is in discussion with customers for a significant value of forecast orders but the timing and the ability to convert discussions into confirmed orders is dependent on normal commercial considerations as well as the results of trials and, to an extent, the results of regulatory reviews. The outcome of both trials and regulatory reviews cannot be predicted with certainty. As at 23rd July 2022, the cash level of £0.7m is expected to be sufficient to allow the business to continue to operate for the next five months if additional orders are not received as forecast and no additional funding is completed. However, revenues reported in the period since the year end are in line with those forecast.

 

Any material change in the timing or value of future revenue would negatively impact the Group's forecast cash position. In the event that the Group is not able to generate the forecast revenues, action would need to be taken to reduce costs or raise additional funds. Management are committed to and confident that they will be successful in raising additional funding which will mitigate uncertainties in respect of the forecasts and secure the Group's funding needs beyond the forecast period. A shortfall in revenues and uncertainty around the timing and success of the realisation of cost savings or fund raising could have a material impact on the Group's liquidity position such that the directors believe the ability to achieve the forecasts and ability to successfully raise funds represent material uncertainties which may cast significant doubt on the Group's ability to continue as a going concern.

 

However, the directors have a reasonable expectation that new business will be delivered as modelled in the Group's forecasts and that additional funding will be available having entered into discussions with advisors. For these reasons, the directors continue to adopt the going concern basis in preparing the Group's financial statements.

 

(d)      Functional and presentational currency

The financial statements are presented in pounds sterling, which is the Group's functional and presentation currency. All financial information presented has been rounded to the nearest thousand.

 

(e)      Foreign currency transactions

Transactions in foreign currencies are initially recorded in the functional currency by applying the spot rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are taken to the Consolidated statement of comprehensive income.

 

(f)       Segmental reporting

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity's chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segmental information is set out in note 4.

 

(g)  Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of sales related taxes.

 

Revenue related to sales of stock is recognised when goods are dispatched and the title and control over a product have passed to the customer, in accordance with agreed delivery terms.

 

Revenue under service contracts is recognised over the period in which the performance obligation relating to the agreed contract are satisfied. For rentals of the Group's assets, revenue is recognised on a monthly basis based on the agreed rate and number of days for which the asset is on hire to the customer.

 

(h)  Government grants

Government grants are recognised when it is reasonable to expect that the grants will be received and that all related conditions are met, usually on submission of a valid claim for payment.  Government grants of a revenue nature are deducted from administrative expenses in the consolidated statement of comprehensive income in line with the terms of the underlying grant agreement. Government grants relating to capital expenditure are deducted in arriving at the carrying amount of the asset. Government grants relating specifically to Covid-19 support measures have been disclosed as "other operating income".

 

(i)   Leases

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the lessee uses its incremental borrowing rate.

 

Lease payments included in the measurement of the lease liability comprise:

 

-     Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;

-     Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

-     The amount expected to be payable by the lessee under residual value guarantees;

-     The exercise price of purchase options, if the lessee is reasonably certain to exercise the options;

 

-     Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

 

The lease liability is presented as a separate line in the statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

 

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

 

-     The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate;

-     The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used); and

-     A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.

 

The Group did not make any such adjustments during the periods presented.

 

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

 

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories.

 

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset.

 

The depreciation starts at the commencement date of the lease. The right-of-use assets are presented as a separate line in the statement of financial position.

 

The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the 'Property, Plant and Equipment' policy. Variable rents that do not depend on an index or rate are not included in the measurement of the lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs and are included in 'Administrative expenses' in profit or loss.

 

As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. The Group has not used this practical expedient.

 

(j)       Finance expense

Finance expense comprises interest expense on borrowings. All borrowing costs are recognised using the effective interest method.

 

(k)      Income tax

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the consolidated statement of comprehensive income except to the extent that it relates to items recognised directly in equity or in other comprehensive income.

 

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to, the tax authorities.  The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements with the following exceptions:

-     where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination, that at the time of the transaction affects neither accounting nor taxable profit nor loss; and

-     in respect of taxable temporary differences associated with investments in subsidiaries where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

 

Deferred income tax assets and liabilities are measured on an undiscounted basis using the tax rates and tax laws that have been enacted or substantively enacted by the date and which are expected to apply when the related deferred tax asset is realised, or the deferred tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which differences can be utilised. An asset is not recognised to the extent that the transfer or economic benefits in the future is uncertain.

 

Amounts due under the HMRC Research and Development tax credit scheme are accounted for based on the amount of qualifying expenditure in the year and assuming 14.5% of the claim is paid in cash once applicable losses and future profitability have been reviewed.

 

(l)       Property, plant and equipment

Property, plant and equipment assets are recognised initially at cost.  After initial recognition, these assets are carried at cost less any accumulated depreciation and any accumulated impairment losses.  Cost comprises both the aggregate amount paid and the fair value of any other consideration given to acquire the asset, and includes costs directly attributable to making the asset capable of operating as intended.

 

Depreciation is computed by allocating the depreciable amount of an asset on a systematic basis over its useful life and is applied separately to each identifiable component.

The following bases and rates are used to depreciate classes of assets:

 

Systems for rental           -    straight line over 4 years

Plant and equipment        -    straight line over 4 to 5 years

Office Equipment                        -    straight line over 2 to 4 years

Motor vehicles                 -    straight line over 3 years

 

The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate that the carrying value may not be recoverable and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.

 

All property, plant and equipment items are de-recognised on disposal, or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the de-recognition of the asset is included in the Consolidated statement of comprehensive income in the period of de-recognition.

 

(m)     Intangible assets

Intangible assets acquired either as part of a business combination or from contractual or other legal rights are recognised separately from goodwill, provided they are separable and their fair value can be measured reliably.  This includes the costs associated with acquiring and registering patents in respect of intellectual property rights. Trademarks are assessed on recognising fair value of assets acquired by calculating the future net book value of expected cash flows.

 

Development costs are also charged to the statement of comprehensive income in the year of expenditure, except when individual projects satisfy the following criteria:

·      the project is clearly defined and related expenditure is separately identifiable;

·      the project is technically feasible and commercially viable;

·      current and future costs will be exceeded by future sales; and

·      adequate resources exist for the project to be completed.

 

Where intangible assets recognised have finite lives, after initial recognition their carrying value is amortised on a straight-line basis over those lives. Development costs are amortised once the project to which they relate is viewed to be completed and capable of generating revenue. The nature of those intangibles recognised and their estimated useful lives are as follows:

 

Intellectual property licence          -           straight line over 4 years

Development costs                      -           straight line over 6 years

Trademarks                                 -           straight line over 8 years

 

Goodwill is recognised when the purchase price of a business exceeds the fair value of the assets acquired. Goodwill is subject to annual impairment reviews.

 

(n)      Impairment of assets

At each reporting date the Group reviews the carrying value of its plant, equipment and intangible assets to determine whether there is an indication that these assets have suffered an impairment loss. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an assessment of the asset's recoverable amount.

 

An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying value of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, an appropriate valuation model is used, these calculations corroborated by valuation multiples, or other available fair value indicators.  Impairment losses on continuing operations are recognised in the Consolidated statement of comprehensive income in those expense categories consistent with the function of the impaired asset.

 

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased.  If such indication exists, the recoverable amount is estimated.  A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised.  If that is the case the carrying amount of the asset is increased to its recoverable amount.  That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.  Such reversal is recognised in the Consolidated statement of comprehensive income unless the asset is carried at re-valued amount, in which case the reversal is treated as a valuation increase. 

 

After such a reversal the depreciation charge is adjusted in future periods to allocate the asset's revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

 

(o)      Inventories

Inventories are stated at the lower of cost and net realisable value. Cost based on latest contractual prices includes all costs incurred in bringing each product to its present location and condition. Net realisable value is based on estimated selling price less any further costs expected to be incurred to disposal. Provision is made for slow-moving or obsolete items if they are deemed to be no longer usable or sellable.

 

(p)      Financial instruments

A financial asset or financial liability is initially measured at fair value. For an item not at fair value, adjustments to fair value are made through profit and loss (FVTPL) including transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at fair value and subsequently measured at amortised cost.

 

Financial assets

On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (FVOCI) - debt investment; FVOCI - equity investment; or FVTPL. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

 

The Group has only financial assets measured at amortised cost. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

 

-     it is held within a business model whose objective is to hold assets to collect contractual cash flows;

-     its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

Financial assets - Business model assessment

The Group makes an assessment of the objective of the business model in which a financial asset is held at portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

 

-     the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management's strategy focuses on earning contractual interest income, maintaining a particular interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets;

-     how the performance of the portfolio is evaluated and reported to the Company's management;

-     the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed;

-     how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and

-     the frequency, volume and timing of sales of financial assets in prior periods, the reasons for such sales and expectations about future sales activity.

 

Financial assets: Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, 'principal' is defined as the fair value of the financial asset on initial recognition. 'Interest' is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

 

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers:

 

-     contingent events that would change the amount or timing of cash flows;

-     terms that may adjust the contractual coupon rate, including variable‑rate features;

-     prepayment and extension features; and

-     terms that limit the Group's claim to cash flows from specified assets (e.g. non‑recourse features).

Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in the income statement. Any gain or loss on derecognition is recognised in the income statement.

 

Financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into. Basic financial liabilities, including trade and other payables and bank loans are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

 

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

 

Derecognition of financial liabilities

Financial liabilities are derecognised when, and only when, the company's obligations are discharged, cancelled, or they expire.

 

(q)      Cash and cash equivalents

Cash and cash equivalents comprise cash at hand and deposits with maturities of three months or less. Foreign balances are revalued with any gain or loss adjusted.

 

(r)      Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the consolidated statement of comprehensive income, net of any expected reimbursement, but only where recoverability of such reimbursement is virtually certain. 

 

Provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risk specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

 

(s)      Share capital and premium

Proceeds on issue of shares are included in shareholders' equity, net of transaction costs.  The carrying amount is not re-measured in subsequent years. The proceeds of the issue of shares up to the nominal ordinary share value of 15p are included in share capital with the balance of the proceeds, net of relevant transaction costs, included in the share premium

 

(t)      Share option reserve

The cost of issuing share options is calculated using the Black-Scholes method and are included in the share option reserve until the share options are exercised, lapsed or cancelled.

 

(u)       Unlisted Investments

Unlisted investments are stated at fair value with adjustments made following annualised fair value reviews through impairment charges.

 

(v)      Defined contribution pension scheme

The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The amounts charged against profits represent the contributions payable to the scheme in respect of the accounting period.

 

(w)     New and amended standards adopted by the Group

The following new accounting standards, interpretations and amendments to existing standards have been published and are mandatory for the accounting period beginning on 1 April 2022 or later. The Group has not early adopted them.

•     Amendments to IAS 16: Property, Plant and Equipment: Proceeds before intended use.

•     Amendments to IFRS 3: Reference to the Conceptual Framework.

•     Amendments to IAS 37: Onerous Contracts - Cost of Fulfilling a Contract

•     Annual Improvements to IFRS Standards 2018 - 2020: Including amendments to IFRS 9 Financial Instruments and IFRS 16 Lease

 

New standards and interpretations not yet adopted

The Group continues to monitor the potential impact of other new standards and interpretations which may be endorsed and require adoption by the Group in future reporting periods. The Group does not consider that any other standards, amendments or interpretations issued by the IASB, but not yet applicable, will have a significant impact on the financial statements.

 

3.       Use of estimates and judgements

 

The preparation of financial statements requires management to make estimates and judgements that affect the amounts reported for assets and liabilities as at the reporting date and the amounts reported for revenues and expenses during the year.  The nature of estimation means that actual amounts could differ from those estimates.  Estimates and judgements used in the preparation of the financial statements are continually reviewed and revised as necessary. While every effort is made to ensure that such estimates and judgements are reasonable, by their nature they are uncertain and, as such, changes in estimates and judgements may have a material impact on the financial statements. The key sources of judgement and estimation uncertainty that have a significant risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year are discussed below.

 

Taxation

Management judgement is required to determine the amount of tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies. The carrying value of the unrecognised deferred tax asset for tax losses and other timing differences at 31 March 2022 was £790,000 (2021: £243,000). The value of the deferred tax liability at the year-end is £105,000 (2021: £176,000) and which has not been recognised, as it is covered by accumulated tax losses. Further information is included in notes 8 and 23.

 

Revenue recognition

Judgements are required as to whether and when contractual obligations have been fulfilled and in turn the period over which systems rental revenue should be recognised. Further information is included in note 4.

 

Useful Economic Life of assets and impairment

Judgements are required as to the useful economic life of Sealfence assets. Further information on all useful economic lives of assets is included in notes 2 and 10.

 

Development costs

Management judgement is required to determine the appropriate value of an asset as well as when an asset should be recognised. These judgements are based upon the likely timing and level of future revenues. Development costs are periodically assessed for impairment and costs are written-off if the project to which they relate is no longer considered to be commercially viable. The value of the development costs capitalised at 31 March 2022 was £1,532,000 (2021: £1,262,000). Further information is included in note 12.

 

Goodwill impairment

Judgements are required as to the useful economic life of goodwill. These judgements are based upon the likely future benefits that will be derived from the recognised goodwill. Further information on all useful economic lives of assets is included in notes 2 and 12.

 

4.       Segmental information

 

The directors review segmental information at a revenue, gross margin, salary and operating cost level but do not review the balance sheet by segments.

 

A segment is a distinguishable component of the Group's activities from which it may earn revenue and incur expenses, whose operating results are regularly reviewed by the Group's chief operational decision makers to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available. In identifying its operating segments, management generally follows the Group's service line which represent the main products and services provided by the Group.

 

The directors believe that the Group operates in four primary segments being the rental and sale of intelligent acoustic systems designed to deter seals and sea lions from attacking fish farms (Aquaculture), the rentals and sale of underwater measurement and leak detection devices in the Offshore (oil & gas) market and the manufacture, supply of underwater communication and other marine goods in the Connectors division and new sector technology sales, partially derived following the Minnowtech LLC investment and the purchase of the trade and assets of ROS Technology Limited. 

 

All of the Group's revenue have been generated from continuing operations and are from external customers.

 

 


31 March

2022

31 March

2021

 


£'000

£'000

Analysis of revenue




Amounts earned from Aquaculture rentals and sales


1,450

2,553

Amounts earned from Offshore rentals and sales


915

505

Amounts earned from Connectors' sales


1,170

859

Amounts earned from Technology consultancy and sales


757

136



───────

───────



4,292

4,053



═══════

═══════

 

Included within revenue are amounts earned from system rentals and associated charges from one material customer of £725,000 (2021, two: £1,041,000 and £506,000).

 

 

 


31 March

2022

31 March

2021

 


£'000

£'000

Analysis of gross profit




Amounts earned from Aquaculture rentals and sales


590

1,510

Amounts earned from Offshore rentals and sales


687

357

Amounts earned from Connectors' sales


407

319

Amounts earned from Technology consultancy and sales


343

117



───────

───────



2,027

2,303



═══════

═══════

 

 

The Group operates in six main geographic areas, although all are managed in the UK. The Group's revenue per geographical segment based on the customer's location is as follows:

 

 


31 March

2022

31 March

2021

 


£'000

£'000

Revenue 




UK


2,302

2,818

Chile 


326

293

Asia


361

150

Europe (excluding UK)


548

454

North America


462

287

Rest of the World


293

51



───────

───────



4,292

4,053



═══════

═══════

 

The Group's assets are located in the UK and Chile and although some of its tangible assets, in the form of systems for rental, are located in Chile, all are owned by the company or its subsidiaries.

 

5.       Operating loss

 

Operating loss is stated after charging/(crediting):

 


31 March 2022

31 March 2021

 

 


£'000

£'000

 

 



 

 

Depreciation of property, plant and equipment (see note 10)


741

693

 

Depreciation of right-of-use assets (see note 11)


164

118

 

Impairment of property, plant and equipment (see note 11)


311

-

 

Amortisation and impairment of intangible assets (see note 12)


572

165

 

Research and development costs


227

105

 

Exceptional costs


257

161

 

Government grants relating to Covid-19 (Other Operating Income)


(131)

(123)

 

Share-based payment charge (see note 25)


20

55

 

Net foreign exchange losses / (gains)


1

(8)

 



───────

───────

 


 

Exceptional costs relate to one-off and non-recurring costs primarily professional fees incurred

In relation to investment activities, financing and share scheme constitution.

 

  Auditor remuneration 


 


 

31 March 2022

31 March 2021

 


 

£'000

£'000

 

Audit services:

 

 


 

Fees payable to the Group's auditor for the audit of the Group and Company annual accounts 

 

35

25

 

Fees payable to the Group's auditor for the audit of the Company's subsidiaries

 

45

40

 


 

───────

───────

 


 

80

65

 


 

═══════

═══════

 

 

 

6.       Staff costs and numbers

 

The average monthly number of employees (including executive directors) for the continuing operations was:

 

 


31 March 2022

31 March 2021

 


No.

No.

 




Directors


2

2

Administration


17

20

Engineering


9

7

Manufacturing


17

13

 


───────

───────

 


45

42

 


═══════

═══════

 




 

 

 

Staff costs for the Group during the year including executive directors:

 

 


31 March 2022

31 March 2021

 


£'000

£'000

 




Wages and salaries


2,212

1,878

Social security costs


171

206

Other pension costs


56

60



───────

───────



2,439

2,144



═══════

═══════

Directors' remuneration

 

Full details of the directors' remuneration, for current directors, is provided in the audited part of the    Directors' Remuneration Report.

 

The Group operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the Group in an independently administered fund.

 

The charge to the statement of comprehensive income in respect of defined contribution schemes was £56,000 (2021: £60,000). Contributions totalling £8,000 (2021: £9,000) were payable to the fund at the year-end and are included in creditors.

 

7.       Net finance costs

 


31 March 2022

31 March 2021

 


£'000

£'000

Finance income




Bank interest received


-

-



───────

───────

Total finance income


-

-



───────

───────





Finance costs




Bank and loan interest payable


(156)

(5)

Unwinding of discount on deferred acquisition payment


(10)

(52)

Lease interest payable


(6)

(1)

 


───────

───────

Total finance costs


(172)

(58)

 


───────

───────

 




Net finance costs


(172)

(58)

 


═══════

═══════

 

8.       Taxation

 

The tax credit is made up as follows:

 

 


31 March 2022

31 March 2021

 


£'000

£'000

 




Current income tax:




UK corporation tax credit for the year


-

-

Adjustments in respect of prior year


(11)

(99)

Research and development income tax credit receivable


(144)

(177)



───────

───────

Total current income tax


(155)

(276)



───────

───────

Deferred tax expense:




Origination and reversal of temporary differences


(96)

86



───────

───────





Tax credit per statement of comprehensive income


(251)

(192)



═══════

═══════

 

 

The tax charge differs from the standard rate of corporation tax in the UK of 19% for the year ended 31 March 2022 (19% for the year ended 31 March 2021).  The differences are explained below:

 

  


31 March 2022

31 March 2021

 


£'000

£'000

 




Loss on ordinary activities before taxation


(2,155)

(726)

Add back losses incurred in Chile


122

87



───────

───────

UK loss on ordinary activities before taxation 


(2,033)

(639)





UK tax credit at standard rate of 19% (2021: 19%)


(386)

(121)

Effects of:




Fixed assets timing differences


(74)

42

Expenses not deductible for tax


72

51

Additional deduction for R&D expenditure


(144)

(186)

Adjustments in respect of prior year


(11)

(99)

Prior year losses utilised


43

 55

Deferred tax not recognised


249

66



───────

───────

Total taxation credit


(251)

(192)



═══════

═══════

 

 

The Group has accumulated losses available to carry forward against future trading profits. The estimated value of the deferred tax asset measured at a standard rate of 25% (2021: 19%) is £790,000 (2021: £243,000), of which £nil (2021: £nil) has been recognised, as it is not certain that future taxable profits will be available against which the unused tax losses can be utilised.

 

The Group also has a deferred tax liability being accelerated capital allowances, for which the tax measured at a standard rate of 25% (2021: 19%) is £105,000 (2021: £176,000) and which has not been recognised, as it is covered by accumulated tax losses.

 

In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate will increase to 25%. This was substantively enacted on 24 May 2021. The deferred tax balance at 31 March 2022 has been calculated based on the rate as at the balance sheet date of 25%.

 

9.   Losses per share

 

Basic earnings or losses per share are calculated by dividing the loss or profit after tax attributable to the equity holders of the Group by the weighted average number of shares in issue during the year.

 

Diluted earnings or losses per share are calculated by adjusting the weighted average number of shares outstanding to assume conversion of all potential dilutive shares, namely share options. The calculation of earnings or losses per share is based on the following losses and number of shares.

 

In calculating the weighted average number of ordinary shares outstanding (the denominator of the earnings per share calculation) during the period in which the reverse occurs:

 

(a)  The number of ordinary shares outstanding from the beginning of that period to the acquisition date shall be computed, on the basis of the weighted average number of ordinary shares of the legal acquiree (accounting acquirer) outstanding during the period multiplied by the exchange ratio established in the merger agreement; and

 

(b)  The number of ordinary shares outstanding from the acquisition date to the end of that period shall be the actual number of ordinary shares of the legal acquirer (the accounting acquiree) outstanding during that period.

 

A reconciliation is set out below.


2022

 

2021


£'000

 

£'000

Loss for the year attributable to owners of the Group

(1,904)


(534)

Weighted average number of shares:




- Basic

32,535,945


30,561,747

- Diluted

34,024,147


30,894,123

Basic losses per share (pence)

(5.9)


(1.7)

Diluted losses per share (pence)*

(5.9)


(1.7)

 

Weighted average number of shares:




- Basic

32,535,945


30,561,747

- Diluted

 34,024,147


 30,894,123





Adjusted basic losses per share (pence)

(5.9)


(1.7)

Adjusted diluted losses per share (pence)

(5.9)


(1.7)

 

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has share options that are dilutive potential ordinary shares.

 

*These shares are not considered dilutive because they decrease the loss per share.

 

10.     Property, plant and equipment

 

 

Systems for rental

Plant and equipment

Motor vehicles  

Total

 

£'000

COST



 

 

At 31 March 2020

2,104

170

50

2,324

Additions

557

191

56

804

Disposals

(73)

-

(20)

(93)

At 31 March 2021

2,588

361

86

3,035

Additions

370

52

1

423


───────

───────

───────

───────

At 31 March 2022

2,958

413

87

3,458


───────

───────

───────

───────

DEPRECIATION




 

At 31 March 2020

809

41

32

882

Depreciation charge for year

594

83

16

693

Depreciation eliminated on disposals

(73)

-

(15)

(88)

At 31 March 2021

1,330

124

33

1,487

Depreciation charge for year

625

89

27

741

Impairment for year

311

-

-

311


───────

───────

───────

───────

At 31 March 2022

2,266

213

60

2,539


───────

───────

───────

───────

NET BOOK VALUE




 

At 31 March 2022

692

200

27

919


═══════

═══════

═══════

═══════

At 31 March 2021

1,258

237

53

1,548


═══════

═══════

═══════

═══════

 

 

Depreciation charges in relation to Systems for rental are included in costs of sale. All other depreciation is included in administrative expenses.

 

Impairment charges for the year relate to Sealfence rental systems returned from customers.

 

11.     Leases

 

 

 

Right-of-use assets

 


 

 

Buildings and facilities

Motor vehicles

 

 Total


 

 

£'000

£'000

  £'000

Cost

 

 

 



At 1 April 2020

 


312

-

312

Additions

 


243

134

377

Disposals

 


(44)

-

(44)

At 31 March 2021

 

 

511

134

645

Additions

 


33

43

76

Disposals

 


(27)

-

(27)


 

 

──────

──────

──────

At 31 March 2022

 

 

517

177

694


 

 

──────

──────

──────


 





Accumulated depreciation

 





At 1 April 2020

 


20

-

20

Charge for the year

 


100

18

118

Disposals

 


(19)

-

(19)

At 31 March 2021

 


101

18

119

Charge for the year

 


123

41

164

Disposals

 


(23)

-

(23)


 


──────

──────

──────

At 31 March 2022

 


201

59

260


 


──────

──────

──────

 

 

 

 

 

 

Carrying amount

 

 

 



At 31 March 2022

 

 

316

118

434


 

 

══════

══════

══════

At 31 March 2021

 

 

410

116

526


 

 

══════

══════

══════

 

The Group leases several assets including buildings and facilities as well as motor vehicles acquired during the year. The average lease term by asset is 2.8 years (2021: 3.6 years). This term includes an extension option, which the Group is reasonably certain to exercise.

 

 

Amounts recognised in profit and loss:

 

 


 

 

31 March 2022

31 March 2021


 

 

£'000

£'000

Depreciation expense on right-of-use assets

 


164

118

Interest expense (included in finance cost) 

 


6

1


 




The total cash outflow for leases amount to £181,000 (2021: £111,000).

 

 

Lease liabilities

 

Maturity analysis

A maturity analysis of lease liabilities based on undiscounted gross cash flows is reported in the table below:


 

31 March

 2022

31 March

 2021

 


 

£'000

£'000

 


 




Year 1

 

168

263


Year 2

 

155

125


Year 3

 

92

88


Year 4

 

21

56


Year 5

 

0

17


Interest costs

 

(20)

(28)



 

───────

───────

 

Total lease liabilities

 

416

521



 

═══════

═══════

 

 

 

 

 

 

31 March

 2022

31 March

 2021

 


 

£'000

£'000

 


 



 

Due within one year

 

168

263

 

Due in over one year

 

248

258

 


 

───────

───────

 

Total lease liabilities

 

416

521

 


 

═══════

═══════

 

 

The Group does not face a significant liquidity risk with regard to its lease liabilities. All lease obligations are denominated in pounds sterling.

 

12.     Intangible assets


Goodwill

Trademarks

IP licence

Development costs

Total intangible assets

 

 

£'000

£'000

£'000

£'000

£'000

 

Cost





 

 

At 31 March 2020

1,059

515

142

747

2,463

 

Additions

-

-

286

680

966

 

At 31 March 2021

1,059

515

428

1,427

3,429

 

Additions

-

-

-

587

587

 


──────

───────

───────

───────

───────

 

At 31 March 2022

1,059

515

428

2,014

4,016

 


──────

───────

───────

───────

───────

 

Amortisation





 

 

At 31 March 2020

28

65

119

97

309

 

Charge for the year

-

64

33

68

165

 

At 31 March 2021

28

129

152

165

474

 

Charge for the year

-

64

70

143

277

 

Impairments

-

-

-

295

295

 


──────

───────

───────

───────

───────

 

At 31 March 2022

28

193

222

603

1,046

 


──────

───────

───────

───────

───────

 

 

Net Book Value

──────

───────

───────

───────

───────

 

At 31 March 2022

1,031

322

206

1,411

2,970


──────

───────

───────

───────

───────

At 31 March 2021

1,031

386

276

1,262

2,955

 

 

══════

══════

══════

══════

═══════

 

 

Goodwill relates to the acquisition of MarineSense Limited of £611,000 and the acquisition of Link Subsea Limited of £420,000. Impairment calculations are reviewed bi-annually to ensure goodwill is valued fairly. Discounted cash flow modelling is undertaken based on forecast future revenues and costs and the values compared to the value of goodwill recognised with any required adjustments made accordingly.

 

IP license additions during the prior year mostly pertained to the intellectual property acquired as a part the acquisition of assets and liabilities of ROS Technology Limited, which took place in November 2020. The Group elected to apply the optional concentration test, which resulted in a conclusion that the acquisition is not a business combination on the basis that substantially all of the fair value of the gross assets acquired is concentrated in a group of similar identifiable assets. Therefore, this acquisition was accounted as an asset acquisition (i.e. outside the scope of IFRS 3). The remaining useful life of this asset is 3.6 years (2021: 4.6 years).

 

Development costs primarily relate to the development of the Group's new products which involve the utilisation internal salary costs and purchase of external materials for the development of prototypes.

 

13.     Unlisted investments

 


31 March 2022

31 March 2021

 


£'000

£'000

 




Unlisted equity securities


297

297

Additions in the year


214

-



───────

───────



511

297



═══════

═══════

 

Unlisted equity securities pertain to 15% of ordinary share capital of Minnowtech LLC and 10% of ordinary share capital of Blue Lions Labs Ltd which are both held directly by OTAQ Group Limited.

 

The directors consider that the carrying amount of unlisted equity securities approximates to their fair value and that no impairment is required at the reporting date.

 

14.     Subsidiaries of the Group

 

The principal subsidiaries of the Group at 31 March 2022 and 31 March 2021 are as follows:

 

Subsidiary undertakings

Country of incorporation

Principal activity

Class of shares held

% Held

 

OTAQ Group Limited 1

England

Fish farm security; rental and sale to offshore and gas industry

Ordinary

100% direct

OTAQ Aquaculture Limited2

Scotland

Fish farm security

Ordinary

100% indirect

OTAQ Chile SpA* 3

Chile

Fish farm security

Ordinary

100% indirect

OTAQ Offshore Limited 2

Scotland

Dormant

Ordinary

100% indirect

OTAQ Connectors Limited 1

England

Dormant

Ordinary

100% indirect

 

OTAQ Group UK Limited and OTAQ UK Limited were formally dissolved on 27 July 2021.

 

*OTAQ Chile SpA has a year end date of 31 December in order to comply with the requirements of the Chilean authorities.

 

1 Registered office address: 8-3-4 Harpers Mill, South Road, White Cross, Lancaster, England, LA1 4XF

2 Registered office address: Crombie Lodge, Aberdeen Innovation Park, Campus 2, Aberdeen, Scotland, AB22 8GU

3 Registered office address: Pacheco Altamarino 2875, Puerto Montt, Chile

 

15.     Trade and other receivables

 


31 March 2022

31 March 2021

 


£'000

£'000

Current:



 

Trade receivables - gross claim value


1,439

531

Provision for impairment of trade receivables


-

(28)

Prepayments


142

207

Other


185

150



───────

───────



1,766

860



═══════

═══════

 

Trade receivables are non-interest bearing and are generally due and paid within 30 to 60 days. The directors consider that the carrying amount of trade and other receivables approximates to their fair value and that no impairment is required at the reporting date. Trade and other receivables represent financial assets and are considered for impairment on an expected credit loss model. Therefore, there is no provision for impairment at the statement of financial position date (2021: £28,000).

 

The age of net trade receivables is all within one year (2021: one year) except for £23,000 which is less than two years and the average gross debtor days calculated on a count back basis were 78 days (2021: 44 days).

 

16.     Income tax asset

 


31 March 2022

31 March 2021

 


£'000

£'000

 




Research and development tax credit receivable


166

286



───────

───────



166

286



═══════

═══════

 

17.     Inventories

 


31 March 2022

31 March 2021

 


£'000

£'000

 




Stock


1,182

899



───────

───────



1,182

899



═══════

═══════

 

The value of inventory provided for as at 31 March 2022 is £64,000 (2021: £97,000). £1,010,000 of stock was expensed in the year through cost of sales (2021: £671,000).

 

18.     Cash and cash equivalents

 


31 March 2022

31 March 2021

 


£'000

£'000

 




Cash at bank and in hand


1,008

3,120



───────

───────



1,008

3,120



───────

───────

 

Cash at banks earns interest at floating rates based on daily bank deposit rates. An analysis of cash and cash equivalents by denominated currency is given in note 28.

 

19.     Share capital and share premium

 

The called-up and fully paid share capital of the Company is as follows:

 

 


31 March 2022

31 March 2021

 


£'000

£'000

Allotted, called-up and fully paid: 37,716,250 (2021: 30,763,251) Ordinary shares of £0.15 each (2021: £0.15 each)


5,657

4,614



───────

───────

 

 

Movements in ordinary shares:

 

 

Number of shares

Share capital

Share premium

 

Total

 

No

£'000

£'000

£'000

At 31 March 2020

30,548,599

4,582

2,892

7,474

Shares issued during the year

37,240

6

5

11

Exercise of share options

177,412

26

-

26

At 31 March 2021

30,763,251

4,614

2,897

7,511

Shares issued to employees

95,854

14

14

28

Shares issued during the year

6,272,729

941

369

1,310

Exercise of share options

584,416

88

-

88


───────

──────

────

────

At 31 March 2022

37,716,250

5,657

3,280

8,937


───────

──────

────

────

 

During the year 95,854 (2021: 37,240) ordinary shares were issued as part of the Share Incentive Plan   as detailed in note 25.

 

On 11 January 2022, 6,272,729 ordinary shares were issued following a General Meeting of the Company held on 10 January 2022.

 

20.     Reserves

 

Share option reserve

The share option reserve arises from the requirement to value share options in existence at the year end at fair value. Further details of share options are included at note 25.

 

Share premium

The share premium account represents the amount received on the issue of ordinary shares by the Company in excess of their nominal value less applicable costs and is non-distributable.

 

Merger relief reserve

The merger relief reserve arose on the Company's reverse acquisition of OTAQ Group Limited on 31 March 2020 and relates to the share premium on the 21,539,904 shares issued to acquire OTAQ Group Limited.

 

Reverse acquisition reserve

The reverse acquisition reserve was created in accordance with IFRS 3 'Business Combinations'. The reserve arises due to the elimination of the Company's investment in OTAQ Group Limited. Since the shareholders of OTAQ Group Limited became the majority shareholders of the enlarged group, the acquisition is accounted for as though there is a continuation of the legal subsidiary's financial statements. In reverse acquisition accounting, the business combination's costs are deemed to have been incurred by the legal subsidiary.

 

Other reserve

Other reserve represents the value of the exercised or lapsed share options which were exercised and the foreign exchange in relation to the translation of subsidiaries reporting in foreign currencies.

 

Revenue reserve

The revenue reserve accumulates the losses attributable to the equity holders of the parent company.

 

21.     Deferred payment for acquisition

 

 

31 March 2022

31 March 2021

 

£'000

£'000

Current



Fair value of deferred cash consideration on the acquisition of OTAQ Offshore Limited (formerly MarineSense Limited)

213

187

Fair value of deferred cash consideration on the acquisition OTAQ Connectors Limited (formerly Link Subsea Limited)

-

28


───────

───────


213

215


═══════

═══════

Non-current



Fair value of deferred and contingent consideration on the acquisition of OTAQ Offshore Limited (formerly MarineSense Limited)

-

188

Fair value of deferred cash consideration on the acquisition OTAQ Connectors Limited (formerly Link Subsea Limited)

-

44


───────

───────


-

232


═══════

═══════

 

 


31 March 2022

31 March 2021

 


£'000

£'000

Deferred payment for acquisition movement




Opening balance


215

505

Additions on acquisition (discounted)


-

-

Unwinding of discount


10

52

Interest paid on deferred consideration


-

(29)

Repayments


(52)

(300)

Revaluation of the deferred consideration


40

(13)



───────

───────

Closing balance


213

215



═══════

═══════

 

 

As part of the acquisition of OTAQ Offshore Limited (formerly MarineSense Limited) on 23 November 2018, there was a contingent consideration in place in that in the event that on the third anniversary of completion the market value of OTAQ plc's share is less than 64p per share, a sum of up to £250,000 might be payable to the previous owners. As the relevant share price of OTAQ plc on the third anniversary date was 23.5p, a sum of £250,000 plus interest became payable which was agreed to be deferred until after the financial year with the latest payment date being 1 August 2023.

 

22.     Trade and other payables

 


31 March 2022

31 March 2021

 


£'000

£'000

Current:




Trade payables


520

712

Accrued expenses


109

199

Deferred revenue


453

764

Other creditors


161

133



───────

───────



1,243

1,808



═══════

═══════

 

Non-current:




Other creditors


-

38



───────

───────



-

38



═══════

═══════

 

 

Trade and other payables comprise amounts outstanding for trade purchases and on-going costs. Trade payables and accruals principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period on purchases is 30 days (2021: 30 days). No interest is paid on trade payables over 30 days.

 

The directors consider that the carrying amount of trade payables approximates to their fair value. 

 

Non-current other creditors due pertain to the deferred portion of the consideration for the intangible assets acquired during the prior year.

 

23.     Deferred tax liability

 


31 March 2022

31 March 2021

 


£'000

£'000

Deferred tax liability




Deferred taxation due to timing differences


-

88

Deferred taxation on intangibles recognised at acquisition


80

 

88



───────

───────



80

176



═══════

═══════

 

24.     Borrowings

 


31 March 2022

31 March 2021

 


£'000

£'000

 




Interest bearing loans 


1,813

2,000



───────

───────



1,813

2,000



═══════

═══════

 




Analysis of loans and borrowings

 

Borrowings are classified based on the amounts that are expected to be settled within the next 12 months and after more than 12 months from the reporting date, as follows:

 

 


31 March 2022

31 March 2021

 


£'000

£'000

 




Current liabilities


421

187

Non-current liabilities


1,392

1,813



───────

───────



1,813

2,000



═══════

═══════

 




The terms and conditions of outstanding loans are as follows:

 




31 March 2022

 

31 March 2021

 

Nominal interest rate

Date of maturity

Face value

Carrying amount


Face value

Carrying amount

 



£'000

£'000


£'000

£'000

CBILS loan

The higher of 8% p.a. and the monthly average Sterling Over Night Index Average ("SONIA") plus 6.0%

1 January 2026

              1,813

 

1,813


              2,000

 

2,000

 

Total interest-bearing liabilities


───────

1,813

───────

1,813


───────

2,000

───────

2,000

 

 

 

 

 

 


═══════

═══════


═══════

═══════

 

 

On 1 February 2021, one of the Company's subsidiaries, OTAQ Aquaculture Ltd, signed a £2,000,000 loan agreement which is supported by the Government's Coronavirus Business Interruption Loan Scheme (CBILs). Growth Lending 2020 Ltd accordingly registered a charge against the fixed and floating assets of the Group.  

 

The loan was fully drawn on 2 February 2021 and amortised as follows:

•    Months 0 - 6: 0% amortisation;

•    Months 7 -12: 1% amortisation of initial drawn amount, per tranche, to be paid each month;

•    Month 12 onwards: remaining amount to be repaid in equal instalments over the remaining term of the facility.

 

In addition, 1.5% of the total Facility was paid on completion as the Facility fees. Loans due to shareholders were fully repaid in April 2020.

 

Liabilities arising from financing activities

 



Lease liabilities

CBILS



£'000

£'000





Balance at 1 April 2021


521

2,000

Cash flows




Repayment of borrowings


-

(187)

Lease payments


(181)

-

Non-cash changes*


76

-

Balance at 31 March 2022

 

416

1,813

 

 

*This balance includes £76,000 (2021: £377,000) of new leases entered to in the year.

 

The leases liabilities relate to capital amounts only.

 

25.     Share options

 

 

On 19 August 2021, the Company granted 550,000 of share options to various key management personnel under the Enterprise Management Incentive ("EMI") Share options. On 16 December 2021, the Company granted 250,000 of share options to a new key management employee under the Enterprise Management Incentive ("EMI") Share options. Vesting conditions are detailed in the Remuneration Committee report.

 

An option-holder has no voting or dividend rights in the Company before the exercise of a share option.

 

Set out below are summaries of options granted under the plan: 

 


31 March 2022

31 March 2021


Weighted average exercise price per share option

Number of
options

Weighted average exercise price per share option

Number of
options






At 1 April

£0.30

2,144,908

£0.32

1,801,912

 

Granted during the year

 

£0.60

 

800,000

 

£0.24

 

1,793,600

Exercised during the year

£0.01

(584,416)

£0.01

(177,412)

Lapsed during the year

£0.01

(229,592)

£0.01

(229,592)


───────

───────

───────

───────

As at 31 March

£0.52

2,130,900

£0.30

2,144,908


═══════

═══════

═══════

═══════

 

The remaining weighted average contractual life of the share options and warrants at 31 March 2022 is 7.69 years with the weighted average exercise price being £0.50 (2021: £0.26). The weighted average share price on the date of exercise of share options exercised during the year was £0.36 (2021: £0.28).

 

Fair value of options granted

 

The estimated average fair value of 800,000 (2021: 1,793,600) options granted during the year was £0.08 (2021: £0.25). The fair value at grant date is determined using an adjusted form of the Black-Scholes model which includes a Monte Carlo simulation model that takes into account the exercise price, the term of the option, the share price at grant date and expected price volatility of the underlying share, based on OTAQ plc historical share price history, and the risk-free interest rate for the term of the option.

 

The model inputs were:

•     share prices at grant date of £0.23 to £0.42 (2021: £0.42);

•     exercise prices of £0.595 to £0.600 (2021: £0.001 to £0.595);

•     expected volatility of 50% to 58% (2021: 58%);

•     expected dividend rate of 0% (2021: 0%);

•     contractual life of 0 to 3 years (2021: 3 to 10 years); and

•     a risk-free interest rate of 1% (2021: 1%).

 

The total reserve and share-based payment expense recognised in the statement of comprehensive income for the year ended 31 March 2022 in respect of these options granted was £20,000 (2021: £55,000).

 

26.     Commitments and contingencies

 

Capital commitments

The Group is committed to the following capital expenditure contracted in the current financial year:

 

 


31 March 2022

31 March 2021

 


£'000

 

£'000

 



411

1,025



═══════

═══════

 

Contingencies

There were no contingent liabilities at 31 March 2022 and 31 March 2021.

 

27.     Financial instruments - classification and measurement

 

Financial assets

Financial assets measured at amortised cost comprise trade receivables and cash, as follows:

 

 


31 March 2022

31 March 2021

 


£'000

£'000

 

Trade receivables


1,439

503

Cash at bank and in hand


1,008

3,120



───────

───────



2,447

3,623



═══════

═══════

Financial assets measured at fair value include the following:

 

 


31 March 2022

31 March 2021

 


£'000

£'000

Unlisted equity securities


297

297

Investments made in unlisted equity securities during the year


214

-



───────

───────



511

297



═══════

═══════

 

On 7th May 2021, one of the Company's subsidiaries, OTAQ Group Limited, invested US$300,000 in Blue Lion Labs Ltd, a company incorporated in Ontario, Canada, in return for a 10% equity stake.

 

Financial liabilities

Financial liabilities measured at amortised cost comprise trade and other creditors, loans, deferred payment for acquisition and lease liabilities as follows:

 


31 March 2022

31 March 2021

 


£'000

£'000

 

Trade payables


 

520

 

751

Other creditors


161

133

Loans


1,813

2,000

Accrued expenses


109

199

Deferred payment for acquisition


 214

 215

Lease liabilities


 416

 521



───────

───────



3,233

3,819

 

 


═══════

═══════

28.     Financial risk management

 

The Group's activities expose it to a variety of financial risks: interest rate risk, liquidity risk, market risk, currency risk and credit risk.  Risk management is carried out by the board of directors.  The Group uses financial instruments to provide flexibility regarding its working capital requirements and to enable it to manage specific financial risks to which it is exposed.

 

The Group finances its operations through a mixture of equity finance, cash, loans and liquid resources and various items such as trade debtors and trade creditors which arise directly from the Group's operations.

 

(a)   Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows associated with the instrument will fluctuate due to changes in market interest rates. 

 

Interest bearing assets including cash and cash equivalents are considered to be short-term liquid assets. It is the Group's policy to settle trade payables within the credit terms allowed and the Group does therefore not incur interest on overdue balances. 

 

The Group has external borrowings linked to SONIA but capped until SONIA exceeds 2%; the risk is therefore limited in the short to medium term given current low SONIA rates. The reduction of interest received on cash surpluses held at bank is based on a floating rate of interest. The principal impact to the Group is the result of interest-bearing loans and cash including cash equivalent balances held as set out below:

 

 

 


31 March 2022


31 March 2021

 


Fixed rate

Floating rate

Total


Fixed rate

Floating rate

Total

 


£'000

£'000

£'000


£'000

£'000

£'000

Cash at bank and in hand


-

1,008

1,008


-

3,120

3,120

Interest bearing loans 


(1,813)

-

(1,813)


(2,000)

-

(2,000)



────

─────

────


────

─────

────

Total


(1,813)

1,008

(805)


(2,000)

3,120

1,120



════

═════

════


════

═════

════

 

(b)   Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulties in meeting obligations associated with financial liabilities.  Liquidity risk arises from the repayment demands of the Group's lenders. 

 

The Group manages all of its external bank relations centrally. Any material change to the Group's principal banking facility requires approval by the board. The cash requirements of the Group are forecasted by the board annually.  The Group is dependent on any external borrowings through it's CBILs facility.

 

At the reporting date the Group was cash positive.

 

The following tables set out the maturity profile of the Group's non-derivative financial liabilities, based on undiscounted contractual cash outflows, as at the following dates:

 

 


31 March 2022

31 March 2021

 


£'000

£'000

Trade and other payables




Less than 2 months


629

1,045

Other financial liabilities




Less than 2 months


224

100

3 months - 1 year


733

551

1 - 5 years


1,647

2,123



───────

───────

Total


3,233

3,819

 

 


═══════

═══════

 

(c)   Capital risk management

The Group reviews its forecast capital requirements on a half-yearly basis to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders. It is the current strategy of the Group to finance its activities from existing equity and reserves as well as additional financing where appropriate and by the issue of new equity as required.

 

The capital structure of the Group consists of equity attributable to equity holders, comprising issued share capital, share premium, other reserves and retained earnings as disclosed in notes 19 to 20 and the statement of changes in equity.  Total equity attributable to the equity holders of the parent company was £5,180,000 at 31 March 2022 (31 March 2021: £5,733,000).

 

The Group is not subject to externally imposed capital requirements.

 

(d)   Credit risk management

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Group and the risk that any debtors of the Group may default on amounts due to the Group.  The Group's principal financial assets are trade receivables, other debtors and cash equivalents.

 

The Group has a policy of only dealing with credit worthy counterparties which is assessed through credit checks and trade references.  The Group had £1,439,000 of trade receivables at the year end (2021: £503,000). The Group's exposure to credit risk is influenced mainly by the individual characteristics of each customer or counterparty.  However, management also considers the factors that may influence the credit risk of its customer or counterparty base, including the default risk associated with the industry and country in which the customer or counterparty operates.  Receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant. All trade receivables are ultimately overseen by the director responsible for finance and are managed on a day-to-day basis by the finance team.  Credit limits are set as deemed appropriate for the customer.

 

The maximum exposure to credit risk in relation to cash and cash equivalents is the carrying value at the statement of financial position date.

 

(e)   Currency risk

The Group has limited exposure to currency risk on sales and purchases that are denominated in a currency other than the respective functional currency of the Group. The risk is in respect of United States Dollars, Euros and Chilean Pesos. Transactions outside these currencies are limited.

 

The Group may use forward exchange contracts as an economic hedge against currency risk, where cash flow can be judged with reasonable certainty. Foreign exchange swaps and options may be used to hedge foreign currency receipts in the event that the timing of the receipt is less certain. There were no open forward contracts as at 31 March 2022 or at 31 March 2021 and the Group did not enter into any such contracts during 2022 nor 2021.

 

The summary quantitative data about the Group's exposure to currency risk as reported to the management of the Group is as follows:

 

 

 

31 March 2022

31 March 2021

 

GBP

CLP

USD

AUD

EUR

Total

GBP

CLP

USD

AUD

EUR

Total

 

£'000

£'000

£000

£000

£000

£'000

£'000

£'000

£000

£000

£'000

£'000

Cash at bank and in hand

904

67

37

-

-

1,008

3,048

30

41

-

1

3,120

Trade receivables

1,294

54

74

-

17

1,439

359

76

40

-

28

503

Trade payables

(410)

(21)

(1)

(88)

-

(520)

(713)

(6)

(2)

(30)

-

(751)


───

───

────

───

───

───

───

───

───

───

───

───

Total

1,788

100

110

(88)

17

1,927

2,694

100

79

(30)

29

2,872


═══

═══

════

═══

═══

═══

═══

═══

═══

═══

═══

═══

 

Sensitivity analysis to movement in exchange rates

Given the immaterial asset balances in foreign currency, the exposure to a change in exchange rate is negligible.

 

(f)    Offsetting financial assets and financial liabilities

The Group has not presented any of its financial assets and financial liabilities on a net basis and no master netting arrangements are in place.

 

29.     Related party transactions

 

Transactions with directors and companies controlled by directors

The following transactions with directors and companies controlled by directors of the Company were recorded, including VAT, during the year:

 

 

31 March 2022

31 March 2021

 

£'000

£'000

Charges incurred during the year by OTAQ Aquaculture Limited:



Corsie Technology Limited - a company controlled by a director



For goods and services provided

-

32

 

Charges incurred during the year by OTAQ Group Limited:



Falanx Cyber Defence Limited - a company controlled by a director



For goods and services provided

5

-

 

 

There were no outstanding balances between the Group and related parties at 31 March 2022 or 31 March 2021.

 

Balances and transactions between the Company and its subsidiaries are eliminated on consolidation and are not disclosed in this Note. Remuneration of key management are included in the Remuneration Committee report.

 

 

 

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